RBL Bank Shares Fell 5% on Higher Operating Expenses and Elevated Credit Costs Concern

RBL Bank shares fell more than 3% on a sharp drop in provisions in Q4FY23.

On May 2, RBL Bank’s shares fell 5% in the morning trade as members appeared cautious despite the private lender’s improvement in the March quarter. Analysts consider higher operating expenses and raised credit costs could play spoilsport.

At 11:48 am, the RBL Bank traded 3.3% lower at Rs 156.35 on the BSE.

On April 29, the lender reported a 37% YoY jump in its separate net profit at Rs 271 crore for March. The private lender’s net interest income (NII) plunged 7% YoY to Rs 1,211 crore. While net profit accomplished to beat Street estimates of Rs 222 crore, NII was a bit below at Rs 1,219.6 crore.

RBL Bank stated its highest-ever quarterly profit after tax (PAT), driven by 17% YoY loan growth and stouter margins, offset by higher operating expenses.

Loan growth saw robust traction in retail credit, directed by credit cards or MFI and home loans, tractors, and HDFC Securities.

The bank reported a beat in Q4FY23 earnings amid lower provisions. Margin expanded by 27 bps QoQ to 5.01%, helped by using excess liquidity. Deposit growth was modest, though CASA witnessed a QoQ increase.

Asset quality was further enhanced, with the gross NPA ratio falling to 3.37% against 3.61% in the last quarter and 4.40% in the year-ago period.

Motilal Oswal Financial Services has cut its earnings estimates due to higher operating expenses as the bank invests in new areas of business and branch extension. These encouraged the brokerage firm to downgrade its stock rating to “neutral” with a target price of Rs 185.

HDFC Securities gave a “reduce” rating on the stock with a reviewed target price of Rs 135.

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